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New Approach Needed to Section 1782 Applications in Aid of Proceedings in Europe

Recent Supreme Court decisions about jurisdiction, new limits on the scope of discovery under the Federal Rules of Civil Procedure, and changes in Europe to the enforcement of data protection regulations call for commensurate changes in substance and approach to applications in US federal courts under 28 U.S. Code §1782 - Assistance to foreign and international tribunals and to litigants before such tribunals.

Section 1782 of Title 28 of the United States Code affords US federal district courts discretion to order persons “resid[ing]” or “found” in the United States to provide oral evidence or produce documents or other things for use “in a proceeding in a foreign or international tribunal … upon the application of any interested person”. The principal objective of the provision is, according to the Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 262 (2004), “to assist foreign tribunals in obtaining relevant information that the tribunals may find useful but … cannot obtain under their own laws.” Under §1782 foreign and international tribunals, litigants and other interested persons may seek oral and documentary evidence by order of the federal district court in the district “in which a person resides or is found”.

Issue: The target of a §1782 application

A “person” within the meaning of the statute includes a corporation, company, association, firm, partnership or joint stock company, as well as an individual, but excludes sovereign governments: see 1 U.S.C. §1; Al Fayed v. CIA, 229 F.3d 272, 274 (D.C. Cir. 2000).

In 2006 it was said that a business will be “found” in a district if it would be subject to personal jurisdiction in that district by virtue of its systematic and continuous activities there, even if the corporation’s headquarters or place of incorporation is outside the district: In re Oxus Gold Plc, 2006 WL2927615 (D.N.J. Oct 11, 2006). Thus, in principle, foreign corporations can be ordered to provide evidence and/or documents by a US district court if that court is willing to exercise personal jurisdiction over the corporation.

But recent decisions of the US Supreme Court have substantially limited the circumstances in which US courts exercise jurisdiction over foreign defendants: see Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014) and Walden v. Fiore, 134 S. Ct. 1115 (2014). The Goodyear Dunlop Tires case held that personal jurisdiction applied only when a defendant’s affiliations with the forum state are so constant and pervasive “as to render [it] essentially at home in the forum State.” That point was developed further in Daimler AG v Bauman in relation to jurisdiction over a foreign corporation. The Supreme Court held that ‘affiliations’ between the defendant and the forum state is not established by the volume of commerce there, and that a foreign corporation is “at home” for purposes of general jurisdiction in only a narrow set of circumstances, the paradigm being a corporation’s place of incorporation and its principal place of business. Those criteria were not exclusive, the Court said, but it confirmed that a substantial, continuous, and systematic course of business alone would not be sufficient to establish jurisdiction.

It may, accordingly, be more difficult following Goodyear Dunlop Tires and Daimler AG v Bauman to convince a US district court to assume jurisdiction over a foreign-based company for the purposes of a §1782 application.

Issue: The scope of a §1782 Application

As from December 1, 2015 amendments to the Federal Rules of Civil Procedure have significantly narrowed the scope of discovery available in US civil litigation (in federal courts and the many states that have adopted the FRCP in state courts). The test of discoverability of material “reasonably calculated to lead to the discovery of admissible evidence” has been eliminated in favour of production limited to material relevant to claims and defenses and (shortly stated) “proportional to the needs of the case.” §1782 provides that discovery shall be produced “in accordance with the Federal Rules of Civil Procedure,” and thus courts have discretion to order discovery under the standard of FRCP 26(b)(1), even if the applicant cannot show that the discovery will be “used” in a hearing before the non-U.S. tribunal. See Weber v. Finker, 554 F.3d 1379, 1385 (11th Cir. 2009).

It follows that the exceptionally broad range of discovery potentially available under a §1782 application may now be much harder to obtain, being open to the objection that notwithstanding issues of relevance and availability of material, the applicant cannot establish proportionality in accordance with amended Rule 26(b)(1) of the FRCP.

Issue: Discovery of material containing personal data located in an EU state

The law is not settled as to the availability under §1782 of documents or material located overseas, either physically or by virtue of the fact that access to such material requires use of foreign-based electronic equipment. Some US courts observed, obiter, that §1782 relates only to material located inside the United States: see, e.g., In re Sarrio, 119 F.3d 143, 147 (2d Cir. 1997); Four Pillars Enters. Co. v. Avery Dennison Corp., 308 F.3d 1075, 1079 (9th Cir. 2002); Norex Petroleum Ltd. v. Chubb Ins. Co. of Canada, 384 F. Supp. 2d 45, 55 (D.D.C. 2005).

Recent decisions have, however, gone the other way. The court in In re Gemeinshcaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88 (BSJ), 2006 WL 3844464 (S.D.N.Y. Dec. 28, 2006) found that the statute on its face poses no such restriction and “requires only that the party from whom discovery is sought be ‘found’ here; not that the documents be found here.” A similar finding was made in In re Potanina, 2014 U.S. Dist. LEXIS 182281 (S.D.N.Y. Jan. 5, 2014). In In re Application of Republic of Kazakhstan, 15 Misc. 0081 (SHS) (S.D.N.Y. June 22, 2015) the court upheld an order for discovery against a New York firm where documents were located in the firm’s London branch.

This recent (potential) expansion of §1782 to material located abroad also requires applicants to address European data protection laws. Under the European Data Protection Directive (95/46/EC) the target of a §1782 application may be a “regulated data controller” even if not “established” in an EU state, if it makes use of equipment (such as a server) located in an EU state to process data which includes personal data covered by the Directive. In October 2015 the recognition by the Commission of the Safe Harbour framework (adopted by Commission Decision 2000/520/EC), which allowed personal data to be freely transferred from EU states to US companies (enabling compliance with a §1782 order) was declared invalid by the Court of Justice of the European Union in Schrems (Case C-362/14 Maximilian Schrems v Data Protection Commissioner, EU:C:2015:650). The effect of judgment of the Court is not, of course, to preclude data transfers but to recognise powers of enforcement by individuals and expose such activities to penalties provided under the 1995 Directive as incorporated into domestic laws of EU member states. The Commission Working Party recently announced that if by January 2016 no appropriate solution is found as between the EU and the US data protection authorities, the EU DPAs will take all necessary and appropriate action to enforce EU data protection restrictions.

It remains to be seen whether the new complexities for the transfer of data from EU states or via EU-based servers will complicate the grounds for seeking production of material pursuant to §1782.

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